Posts Tagged ‘startup’
Many aspiring entrepreneurs, without having previously started a business, already have a fixed set of conceptions about embarking on a new venture. The most wide-spread and misconceved of those are:
- I need lot of money to start a business (many ways to start-up with no money or with a bit of bootstraping)
- I will get rich soon (although some successful startup founders get rich and advise others how to get rich, it will require time till your business gets traction and starts making profit for itself and for you; brace yourself to get rich slowly, in the best of cases)
- I need to have a well-conceived and thorough business plan (it is true that business plan is an important fact, but many consultancy and web service providers started off without one)
- I need a unique and great idea to build upon (it is far more important that the idea addresses an open need or delivers in a better, more efficient or more affordable manner that currently available on the market; Betamax vs. VHS story)
- I am the boss and I know better (your employees, your customers, your shareholders, and most importantly, your competition will affect and have sawy on your decisions)
- It will take lot of time till my business makes profit (while number crunching to project profit is useful, it is by no means sufficient; focus on customer needs and offering value is what will eventually bring profit; some take lot of time and other take a year or two)
- I will have more time and freedom (nothing can be further from truth; this is your business and every idea, problem and solution – especially at the beginning stage – will have to go through you, worry you, make you sometimes anxious and other times happy)
- I have this nice/cool product/service and will surely get customers/market share (Apple Newton, Motorola Iridium, and many of top dot-coms were built with this idealogy and resulted in failure)
- I am the boss and I can pay myself as much as I want (while there is much debate about how much a founder’s salary must be, it is obvious that a founder needs to share love with employees if he expects their loyalty, devotion and passion in work)
- I need to take a bold risk in order to succeed (was Bill Gates a risk taker? you rather need to be flexible and adopt to realities, solving problems as you go)
The misconceptions above (and any of their combinations) usher in a bad start, difficult and eventually unsustainable growth of businesses.
Failure. Success. What association do we have with each? Google search of the word “success” returns nearly 281 million results whereas that of “failure” 119 million. These are telling numbers and they seem to reveal the underlying “logic” of our lives. We are afraid of failures, whether they are in our personal lives and in our careers (whether changing a job/career or starting your own business).
Many are driven and inspired by success stories, recipes and recommendations of others. Success, even if it is not yours, feels good. It feels comfortable. Present and future, in that one instant, seem to become brighter and more rewarding. We live in that instant and want to stay in it.
Many are afraid of failure. We hide our failures. We try to forget them. We mostly attribute our failures to a bad luck, an out-of-control happenstance or an incident. Very few of us openly admit a failure, even less their part in it.
What we don’t necessarily know is that fear of failure destroys any chance for a possible success in future. What we also might not know is that failure breeds success.
Throughout our history, many a successful entrepreneurs, businessmen, politicians, scientists failed first before reaching success. Google returns about 672,000 search results for “failure quotes,” and each of those pages – this is a good example – contains quotations and saying of those who made history.
I selected excerpts from some of modern (and currently very) successful entrepreneurs, businessmen and bloggers who tell of their failure stories and experiences.
Have you failed before? Was it as terrible as you had anticipated? Well, here you are reading this article, so it seems you survived all right. Truth is, failure is almost never as bad as we imagine. Fear of failure is usually much worse than failure itself.
I was what they call a “hyper responder.” I’d buy just about anything that promised freedom and fortune. I bought programs about how to trade the commodities market (and I actually did that and made money); I bought programs on how to bet the horses; I even bought a program about how to become a “waste auditor.”
But as my drive intensified, I began to make larger investments.
I dropped $5,000 on a real estate investment course. I realized too late that I was uncomfortable using the techniques in the program; it was basically worthless to me.
And while that loss hurt, it didn’t hurt nearly as much as the next mistake I was about to make.
Yes, he made mistakes. We all do. But he came out of these mistakes and experiences a stronger person.
Because weird as it sounds, failure is a requirement for success.
And like it or not, without failure you can’t truly succeed, so avoiding it pretty much makes you dead in the water right out the gate.
I’ve met (and worked with) some serious “power players” in business. Not just on the Internet, but offline biz owners, too. I’m talking about people who sometimes make more scratch in a DAY than the average working stiff makes in 6 months toiling away for the corporate beast masters.
And you know what all these people have in common?
They started out as miserable FAILURES.
Last but not least, remember one thing. If you are failing or what you are doing is failing and things just seem plain bleak and without any perspective, then perhaps, it is time to give up what you are doing and start anew. Or perhaps, it is time to start doing something else.
There is a right time to give up. There’s a right time to quit. The trick, and it is a HUGE trick, is knowing which is which.
Remember that surrender is every bit as much a part of strategy as victory. Learning when to surrender or lose a smaller battle has been part of the success plan of every major war ever fought. The trick is in knowing what really matters, and never letting go of that. The problem we have is that we fall into the trenches and think the battle is the war.
Failure. Success. Two sides of the same coin. One cannot exist without the other.
Embrace your failure and you will succeed.
I have previously blogged about top dot-com flops. By chance I came accross this great round-up of failed startup post-mortems on ChubbyBrain. The list includes, among others, the following:
- Devver (and here is my take on its failure)
- Monitor110 (see here for my own take on its post-mortem)
An article (also pointing to the above source) on GigaOm featured information about post-mortem of the infamous StandoutJobs . As for main reasons why statups fail, have a look at Paul Graham’s article and my previous blog post. Finally, here is good set of lessons from Mark Goldenson, founder of PlayCafe (one of failed startups on the above list). I especially like his “Set a dollar value on your time,” which helps prioritize tasks and clarify what is and is not important for your business.
Ever since, we have been struggling to break-even, all the more given the unfamiliarity of the market with the concept and with many semi-alternatives such as Starbucks-style coffee shops with moderate Internet connections/quality.
Initially, our agreement was – I was doing it with an Egyptian friend of mine and a partner – that I will take care of the business side and he will be in charge of the logistical and day-to-day management of the company. It took few weeks for me to realize that, however professional and hard-working my friend was, he was not committing the time or brain work required to the company, especially considering the initial stage of our startup and the fact that we did not seek any venture capital, but decided to boostrap. We were both employed full time and Elegua was to be our side project, which we wanted to grow.
Our first stumbling block was to find a comfortable and affordable space in the central Cairo, or close to where many foreigners were living – our target were mostly young, class A/B foreigners, students, young entrepreneurs, techies, geeks. Anyone with a laptop, a need for high-speed Internet connection, comfortable and relaxing working environment and willingness to network with like-minded individuals was qualified. All the more so as there was no real competition, besides the coffee shops with slow and unreliable Internet connections and few Internet cafes (in downtown Cairo there are quite few of them but they all look ramshackle and none allows flexibility of using your own laptop/WiFi).
We did not conduct a proper market research. Instead, we relied on my gut feeling and my partner’s knowledge of Egyptian market and our collective perception that a co-working space would not even need to be sold out. It would be so intuitively appealing that everyone would go for it.
What were the results 7 months later?
Modest revenues (not close to break-even). Many people loved the idea, but not many were ready to brave the Cairo traffic in order to reach the place.We kept on hiring and firing few employees as none were qualified enough- due to lack of time we opted for friends and connections of friends: high turnover. Elegua fan page on Facebook has 200+ fans which failed to convert.
In brief, a failure, but a failure with lots of valuable lessons for me, and surely for my partner.
The main factors in our failure were (my view):
- Choice of partner/co-founder (my partner was more ready to commit in words/ideas but not in actions as it became eventually clear)
- Time/effort commitment (both I and my partner treated Elegua as a side project and did not allocate enough time and effort for its growth)
- The place (the choice of the place was crucial for such a business – though it was central but still not enough to attract the potentially interested)
- Missing market data (we did not realize at the time how popular, reliable and affordable the Internet USB sticks became – many preferred to sit at any chosen place and plug-in a USB stick rather then to displace themselves to a coworking space)
Maybe we were to much in a hurry and could have been a bit more patient and perseverant. But maybe not. The time will show. In any case, I felt this was the right time for such a decision and as much as it was my original idea and closing it, even temporarily is not a joyous occasion, we decided to take this route.
I am moving on with my other project – more about that later – and will perhaps eventually reopen Elegua but with different offerings, another partner – in Egypt any company has to be 51% owned by an Egyptian, and I am not Egyptian – and in a different part of the city!
The Entrepreneur magazine has asked three successful entrepreneurs to describe a scenario of doing things all over again if they had a chance. Below is their response.
Sunny Bonnell, 33, co-founder of Motto Agency, a brand and design firm in Myrtle Beach, S.C. Founded in 2003, the company’s year-end sales are projected to reach about $1 million.
“As a woman business owner, I would have reached out to organizations like Count Me In for Women’s Economic Independence a lot sooner than I did. They have helped me build our networks on a national level (i.e., establish partnerships with FedEx, OPEN from American Express and Dell) and given us access to mentorship, marketing opportunities and business resources.”
Anthony Mongeluzo, 28, founder of The Pro Computer Service LLC, an IT services company in Medford, N.J. He founded the company in 2002 and now has annual revenue in excess of $2 million.
“I would have treated my company like a real business and not looked upon it as a stepchild. I would have given it the same full effort every day and not wasted my energy from 9 to 5 with my employer grasping for a moment or two to sneak in a quick call to one of my clients.”
Kris Putnam-Walkerly, 40, founder of Putnam Community Investment Consulting Inc., a Cleveland-based philanthropy consulting firm for foundations and nonprofits. She founded the company in 1999 and projects 2009 revenue to approach $1 million.
“I should have conducted more regular financial analysis of the business early on to help me understand which types of services and clients were most profitable and to allow me to make more informed decisions as I grew.”
Personally, I am also still struggling with my own startup, Elegua, to have it gain sufficient traction, especially considering that I and my partner are on a bootstrapping mode till now. And we both fall into the “lesson learned” of the second entrepreneur, Anthony Mongeluzo, above. My previous initiative, OpenCoffee Club Cairo, is also sort of put on hold, as the inaugural meetup didn’t attract a threshold number of local entrepreneurs, startup enthusiasts, VCs, techies and individuals interested. This reminds me as well to give it another push, as I also got a recent feedback to renew my effort. Hence:
Persevere, persevere, persevere. Perseverance, especially in cultures/societies with corresponding 0-market knowledge of or unadapted mentality to the ideas of the business initiative in question, it is vital to persevere and however steep a climb it might seem, there is always a societal learning curve, which, once the tipping point is achieved, will become self-sustainable.
Given its complete novelty and unawareness in the MENA region and in Egypt, I think I will give it another try.
What are your experiences and lessons learned?
P.S. I know it has been a long time since my last post. My own side projects and my work prevented my “blogging creative juices” from running. I will try to be more systematic henceforth.
John Osher, a serial entrepreneur who launched several successful companies (notoriously, Cap Toys with sales of $125 million per year and sold it to Hasbro Inc. in 1997 ), came up with an informal list of “16 Mistakes Start-Ups Make” – since expanded to 17 – where he put every blunder and error he made during his entrepreneurial career. Ever since, this list has been used in Harvard Business School case studies and in many business publications. He also used the list in 1999 – he wanted to build a company and product deprived of all his previous blunders – when he started SpinBrush, $5 electric toothbrush (hitherto costing circa $80), which he sold to P&G for $475 million in 2001. Below is his “17 mistakes start-ups make” list:
- Failing to spend enough time researching the business idea to see if it’s viable.
- Miscalculating market size, timing, ease of entry and potential market share.
- Underestimating financial requirements and timing.
- Overprojecting sales volume and timing.
- Making cost projections that are too low.
- Hiring too many people and spending too much on offices and facilities.
- Lacking a contingency plan for a shortfall in expectations.
- Bringing in unnecessary partners.
- Hiring for convenience rather than skill requirements.
- Neglecting to manage the entire company as a whole.
- Accepting that it’s “not possible” too easily rather than finding a way.
- Focusing too much on sales volume and company size rather than profit.
- Seeking confirmation of your actions rather than seeking the truth.
- Lacking simplicity in your vision.
- Lacking clarity of your long-term aim and business purpose.
- Lacking focus and identity.
- Lacking an exit strategy.
And finally, one of the commenters on this article, Trevas from eBookGuru, suggested an essential mistake which causes many (which have inexperienced founders) of startups fail (and is not explicitly present among the 17 mistakes above).
18. Lack of commitment to see the idea through.
Dot.com bubble witnessed many young, bright and entrepreneurial spirits launch themselves into the tech gold rush only to see themselves chasing the fool’s gold. Too many entrepreneurs wound up in searching for jobs in not-so-inspiring companies and earning not-so-high a salaries. But few found courage to continue their entrepreneurial march and found new beginnings, although not necessarily with happy endings. Eric Ries of IMVU, named as one of the Best Young Entrepreneurs of Tech in 2007 by BusinessWeek, is a case in point.
Eric, like many other talented and bright young men in America, had a rather typical start at Yale: have an idea/dream, find a soulmate, work on the idea.
While pursuing a degree in computer science at Yale, Ries took cues from young techies in Silicon Valley who had no problem getting VC firms to back their software dreams. So he and a roommate started CatalystRecruiting.com, an online database of student résumés, and lined up their own slice of the VC pie. “In retrospect it was not such a good idea for investors to give money to kids who just barely knew what they were doing,” Ries says. “They were just throwing money at these companies. But when the bubble burst we had no chance.”
This first idea failed along with ideas and dreams of many others in the same dot.com lot. His next go? There.com.
Soon another lesson would begin. Ries describes There.com as a “traditional VC-model startup,” characterized by high fixed costs, a focused marketing strategy—and an underdeveloped sense of what consumers want. “They start a marketing buzz and a beautiful PR launch,” he says of the strategy too often pursued by startups, There.com included. Ries rattles off other hallmarks: blow through cash by bulking up on staff, hire a vice-president of marketing “and the burn rate keeps growing.” The trouble is, “they never tested if there would be immediate consumer adoption,” Ries says. Worse, the company couldn’t easily adapt to change, he says. “It was rigid and top-down.” Neither Ries nor Harvey lasted long.
The second time failed as well. None of the two did not seem to be a killer startup and couldn’t not wither turbulent and volatile tech market conditions. He did not digest well the errors he has made during the first two gos. One pattern he could however clearly see in both of his failures was the perceived gap between the tech strategy and business strategy, i.e. the tech-centered approach versus the customer-centered one.
For Ries, try No. 3 would be a charm. After losing their jobs at There.com, Ries and Harvey began working on their own startup, IMVU. This time, Ries says, the lessons stuck. “I knew I couldn’t just be a tech entrepreneur,” he says. “The tech strategy needs to be determined by the business strategy, not the other way around,” he says. So the company’s first meeting was all about determining culture and values. “Startups don’t fail from lack of technology,” he says. “They fail from lack of customers.”
His discipline, creativity and determination led him and his partner-in-crime Harvey into founding IMVU. This time, he knew well how to organize his startup; he had learnt it a bitter way, but he did. This time he knew well what there was to know about founding a startup, he had two failures under his belt, and he was determined to succeed.
Early on in his tenure as IMVU’s chief technology officer, Ries audited a class at Berkeley’s Haas School of Business. The instructor, Steve Blank, was so impressed with Ries’ attention to strategy and understanding of business R&D, that he called Shawn Carolan, a managing director at Menlo Ventures, and advised him to invest. Carolan describes Ries as the guy who would go out and read a business strategy book the moment someone mentioned it.
Fruits of his protracted efforts, failures and unfettered passion for what he believed started showing up, the first sign being almost a lucky strike.
Menlo became a backer, as did Allegis Capital (IMVU also had angel investors). “In the consumer market you have to have humility to admit you don’t know exactly what the consumer wants, so that you can be proactive and test features and make changes,” Carolan says. “Eric has an unusual amount of humility and he is unique as a tech person in his ability to be strategic in his business.”
IMVU showed all signs of success early on. Ries started practicing a lean approach for his own startup. Lean startups are resources-, money- and energy-frugal from the very beginning, and as a result are poised better for sustainable growth and long lifetime.
Part of that strategy was taking the product to the customer for testing as early as possible and keeping site development costs low. IMVU.com had a beta version up and running within six months. By contrast, there hadn’t been a test of There.com in its first five years. To prove that the product resonates with customers, there is a small fee associated with participation, and so far, the test phase has met or exceeded the corresponding financial targets.
Additionally, Ries has helped keep expenses in check by adopting a low-cost, low-risk software development process that maximizes ways to improve the site.
IMVU turned out to be an ultimate success and so did Ries, who is not only a full-time in his own startup but serves on boards of other leading tech boxes like pbWiki, Causes and KaChing.
Now the world is facing a recession, the worst one since the Great Depression. But entrepreneurial world is not necessarily crying doom and end to new ideas and initiatives. While some do, others are more moderate by providing an advice/how-to and still others are outright optimistic for launching a startup especially during this recession.
Make your choices.